▲ Stock prices for KOSPI, SK Hynix, and Samsung Electronics are displayed at the Hana Bank dealing room in Jung-gu, Seoul, on June 19.
South Korean semiconductor giants, including Samsung Electronics and SK Hynix, are emerging as key drivers of a global bull market, leading the first earnings rebound for emerging market (EM) companies in four years, Bloomberg reported on June 21.
According to data compiled by Bloomberg, the weighted average earnings per share (EPS) for companies in the MSCI Emerging Markets Index reached 95.1 points for the 12 months ending in May, surpassing the 12-month forward forecast of 94.6 made by analysts a year ago for the first time.
This marks the first such occurrence in about four years since April 2022.
Bloomberg highlighted Samsung Electronics and SK Hynix as prime examples of this earnings surprise.
SK Hynix’s first-quarter net profit exceeded market expectations by 43%, while Samsung Electronics outperformed estimates by 16%.
Taiwan’s TSMC also recorded an earnings surprise, beating expectations by 5.7%.
Emerging market stock prices have risen by approximately 30% so far this year.
Morgan Stanley and JPMorgan Chase have projected that this earnings improvement will cause the upward trend to spread beyond AI-related stocks to a broader range of sectors.
Archie Hart, a fund manager at Ninety One UK, described it as a "true inflection point," adding, "The market is finally being validated by fundamentals rather than running ahead of them."
Valuation gaps were also presented as grounds for further upside potential.
The 12-month forward price-to-earnings (P/E) ratio for the U.S. semiconductor equipment index exceeds 46 times, whereas the MSCI Emerging Markets IT Index stands at just 12.3 times.
In other words, these companies are trading at one-quarter of the valuation of their U.S. counterparts while delivering faster earnings growth.
Hart analyzed that even a 5% shift from U.S. portfolios into emerging markets would result in an approximate 30% increase in emerging market allocation due to the difference in market size.
However, concentration risk due to the heavy reliance on AI remains a cautionary factor.
Jitania Kandhari, Deputy CIO at Morgan Stanley Investment Management, noted that while regional performance disparities will persist, the direction is positive in almost all regions, though she pointed out that the dominance of AI trades is increasing concentration risk.
Ashish Chugh, a fund manager at Loomis Sayles, also stated, "A significant portion of EPS growth will still come from the technology sector."
Anuj Arora, CIO of Emerging Markets Equities at JPMorgan Asset Management, assessed that "a weaker dollar, persistent fiscal deficit spending in major economies, and a multi-year AI and infrastructure capital expenditure cycle are creating a favorable environment for emerging markets."
(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.